On October 1, 2019, the Japanese consumption tax (JCT) rate will be raised from 8% to 10%. Taxable sales and taxable purchases conducted on or after that date are generally subject to JCT at 10%. However, transactions of specific items will remain subject to JCT at 8%. This is mandatory and not optional.

On October 1, 2023, an invoice credit system will be implemented to provide tax credits for JCT on purchases. To claim tax credits for JCT on purchases under the new system, taxpayers must retain a qualified invoice issued by a supplier registered as a taxable enterprise with the tax office.

The changes in 2019 and 2023 will take place during a business year for most taxpayers. It will be critical for taxpayers to have proper accounting, stock verification systems and other internal procedures in place ready to avoid business disruption.

During the transitional period from October 1, 2019, to September 30, 2023, taxpayers must retain invoices that itemize purchases by tax rate and enter that information in an account book in order to claim a tax credit for consumption tax on purchases.

Businesses are advised to begin preparations for the increase in tax rate, the introduction of the multiple tax rate system, and the introduction of the invoice system, including development of capability to issue qualified invoices and the appropriate management of documentary evidence.

For further details please contact

Takashi Murakami, Partner, PwC Tax Japan
Phone: +81 80 3592 6121
E-Mail: takashi.a.murakami@pwc.com

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